I'm here to discuss risk taking. R-squared is for Ranting and Raving, R&R, as well as some more technical topics

Wednesday, November 9, 2011

First National Bank of Walmart

Nearly two years ago, I wrote that we should allow anyone who wants to own a bank own a bank as long as they agree that it will have 100% reserves. In other words, they manage cash, they don't lend money. Pure banking is a logistics and technology exercise. You want safe? That bank is safe without FDIC and without government backstops of any other sort.

In that post, I even suggested that Walmart would step up immediately and deliver deposit and cash management services to their customers. They are, after all, the finest logistics company in America. What does a bank do, after all, other than stock an inventory of exactly 11 items, and make sure that they never run out of those 11 items. (In case you're counting: five small metal discs, six small sheets of paper.) Oh, then they need to make sure they keep track of customers paying for those products.

So, I'm very pleased to see they're listening, or at least trying, according to this New York Times story. Free Walmart from the shackles of regulation! Let them own a real bank with 100% cash and reserves.

About Me

Since completing my PhD in economics at the University of Chicago, I have worked at financial firms ranging from the insanely large (JP Morgan) to the ridiculously small (my current venture has one employee!) with stops in between investing for McKinsey & Company, and Silver Creek Capital Management. I have served on company boards, both public and private.
You can reach me at marc@riskrsquared.com